Digital Garage, Inc.
2Q of FYE June 30, 2014 Financial Report
2014.2.13

Table of Contents
Mission and Business Model・・・・・・・・ 03
Investment Highlights・・・・・・・・・

07

Group Financial Performance Review・・・

12

Segment Performance Review・・・・・・・ 19
Appendix・・・・・・・・・・・・・・・・・・ 39

Copyright © 2014 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

3Corporate Mission
As aDigital Garage creates
innovative business context
for the new Internet age andprovides unique businesssolutions for new lifestyles,
society, and industries bylinking
Real & Cyber
Local & International
Marketing & Technology
Present & Future
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

4

Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTInformation
Technology
MarketingTechnology
Financial
Technology

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

5Enabling Platform For DG’s Incubation Model
DG continues to incubate and develop unique Internet services
through its Enabling Platform since the early days of the Internet

Ⅰ

Ⅱ

Ⅲ

Portal/Search

e-commerce/
Destination Site

Social Media

1995-2000

2000 -

2008 -

Advertising

Payment
環亞智富有限公司
HKEx:1390

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform - 2 Revenue Sources
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

6Investment Highlights

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

7Investment Highlights
Completed global expansion structure- Established the Lean Global structure connecting the 3 headquarters
in the US, Japan, and Hong Kong -Ⅰ

Revised FYE14.6 H1 forecasts upwards

 Incubation Segment to outperform significantly due to favorable equity market
conditions, particularly in the domestic market
 Incurred gain on change in equity to extraordinary income resulting from the listingof econtext ASIA（環亞智富有限公司）

Ⅱ

Launched DG717, an incubation space in San Francisco

 Officially launched the incubation center connecting Silicon Valley and Asia
 Sourcing promising startups and providing support in development and global
expansion bi-directionallyⅢ

econtext ASIA’s IPO on Hong Kong Stock Exchange (HKEx :1390)

 Accelerating Asian expansion of the settlement and EC-related services
 As cornerstone investors TIS and Dentsu joined the existing partners including major
credit card companies (SMCC, Credit Saison, JCB) to jointly promote expansion in the
rapidly-growing EC market in Asia
Copyright © 2014 Digital Garage, Inc. All Rights Reserved8

US Incubation Center Launch (1/2)
Officially launched an incubation center connecting Silicon Valley and Asia
DG717 : an incubation center and an intersection
for the Eastern and Western cultures
Center of the latest incubation ecosystem
FUNCTION❶
Co-working
Space

FUNCTION❸

Supporting growth ofpromising startups by
providing acollaborative
workspace

Events and workshopswith worldly-known
entrepreneurs

FUNCTION❷FUNCTION❹
GlobalMentorship

EventsAgile
Development
SupportGlobal expansion ofOpen Network Lab which
has nurtured over 170
entrepreneurs andengineers

Providing softwaredevelopment andconsulting support by
Neo Innovation
located in DG717

DG717：http://www.dg717.com/
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

9US Incubation Center Launch (2/2)
DG717 Opening Event on November 5th & 6th- SF Mayor Ed Lee proclaimed November 5th to be Digital Garage Day -Copyright © 2014 Digital Garage, Inc. All Rights Reserved

10econtext ASIA became listed on HKEx
Accelerating Business Expansion of Payment ande-Commerce Solutions to Asia
- Raised 6.8 B* JPY for Asian Business Expansion IPO Outline
Market: HKEx (1390) Date of IPO: 12/19/2013 Market Cap : 4.7 B HK$, 63.7 B JPY (new high@9.23 HK$, Jan 14th)

Asian Business Expansion

Major Shareholders / Subsidiaries, etc**
7.2%
5.4%

JV with CardInfoLink

1.5%
58.2%

China

Japan

India

Capital and Business Alliancewith Citrus Pay

2.0%
0.4%
99.8%

Hong
Kong

100.0%
Indonesia

23.0%

JV with MidPlaza Group

50.0%
15.59%

Note * includes over-allotment on January 9, 2014** PT Midtrans : Non-consolidated, Veritrans Shanghai : Equity method affiliated company, Citrus : investment
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

11Group Financial Performance Review

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

12

FY14.6 2Q Summary : P/L (consolidated)
First half of FY14 results significantly exceeded the initial forecast～ Incubation delivered results due to favorable market conditions. Posted
extraordinary income as a result of the listing of econtext ASIA on the HKEx ～JPY in Million

Net sales
Operating income

FY13.6 2Q

Ratio

FY14.6 2Q

Cumulative

InitialCumulative

ActualForecast

Actual

13,846472

15,000▲ 300

YoY

15,622
812

+13%
+72%

Non-operating income

905

1,196

+32%

Investment profit on equity method

566

776

+37%

Foreign exchange gain

199

272

+37%

Non-operating expenses

210

321

+53%

1,687

+45%

Ordinary income

1,167

Extraordinary income

184

473

+157%

18

350

+1844%

4

14

+250%

1,347

2,146

+59%

Income taxes

460

695

+51%

Net income
EBITDA

913
2,269

1,426
2,926

+56%
+29%

Gain on change in equity
Extraordinary loss
Income before income taxes

350

100
940

FY14.6 Full YearAct vs
Fcst

Forecast

1H
Progress+4%-

32,000
1,800

49%
45%

4.8x

3,500

48%

14.3x
3.1x

2,100
4,800

68%
61%

Note: EBITDA is based on preliminary calculation
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

13Half-year comparison of Consolidated Sales/Op income

Sales grew +13% YoY, operating income grew +72% YoY～ In ream terms*, sales grew +32% YoY, operating income grew 3.3x YoY ～(JPY in Million)【Net Sales】

18,000Adjustment for change of fiscal term
15,0001,600

15,622

1,318

Operating income
1,200

1,980

12,000

849

8,606

9,000

Adjustment for change of fiscal term

13,846 14,118

Net sales【Operating Income】

6,297
6,000

812

800

472

11,866
400

302

223

3,000

249
0

0

1H
上期

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

上期
1H
2014.6期
FY14.6

1H
上期

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

上期
1H
2014.6期
FY14.6Note : FY13.6 actuals include the effect of an irregular 15-month reporting period, due to the fiscal year end shift from March to June for consolidated VeritransGroup. 9 months for 1H, 6 months for 2H* Ream terms defined as comparison excluding the additional three months - adjustment for the fiscal year end change

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

14Half-year comparison of Incubation Performance
Achieved strong sales and operating income growth fromthe sales of stocks due to favorable market conditions～ Neo’s software agile business grew steadily ～(JPY in Million)【Net Sales】

3,000

1,600

2,394

2,500

【Operating Income】
1,381

1,200

2,010

2,000

1,761

800

1,500
400
1,000

471

2H
下期

1H
上期

250

748

600

0

500

0

▲ 202

▲ 400

1H
上期

492

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

1H
上期
2014.6期
FY14.6

1H
上期

2H
下期

2012.6期
FY12.61H
上期

2013.6期
FY13.62014.6期
FY14.6

Copyright © 2014 Digital Garage, Inc. All Rights Reserved15

Half-year comparison of Marketing Performance
Growth gaining traction in internet ads and mall business～ Investing in data science business ～(JPY in Million)【Net Sales】

7,000

5,930

6,000

4,712

5,000
4,000

6,625

【Operating Income】

400

335

350

5,113

300

282
228

250

3,845

249

223

200
3,000

150

2,000

100

1,000

50

0

0

1H
上期

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

上期
1H
2014.6期
FY14.6

1H
上期

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

1H
上期
2014.6期
FY14.6

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

16Half-year comparison of Payment Performance
Achieved net sales and operating income growth of 10% YoY in realterms*, following the expansion of domestic e-commerce market～ econtext ASIA became listed on the HKEx. Started full-fledged Payment strategy in Asia ～(JPY in Million)【Net Sales】

10,0001,000

Adjustment for change of fiscal term
8,000

7,984

Net sales

1,980

800

6,428

6,603

Adjustment for changeof fiscal term
IPO related costs
Royalty
Operating income

223
31
29

600

6,000

【Op Inc.
in real terms*】
FY13.6 1H 626
FY14.6 2H 691

26
157

82
146

400

4,000

2,000

【Operating Income】

1,851

1,883

6,004

566
200

282

268

上期
1H

下期
2H

514

463

0

0

1H
上期

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

上期
1H
2014.6期
FY14.62012.6期
FY12.6

上期
1H

下期
2H

2013.6期
FY13.6

上期
1H
2014.6期
FY14.6

Note: *Real terms defined as for net sales - YoY comparison of the net sales excluding adjustment for change of fiscal term, for operating income- YoY comparison of the operation income excluding adjustment for change of fiscal term but including IPO related costs and royalty.
Royalty is IP licensing fees paid by econtext and Veritrans to Digital Garage for use of trade name / trademarks / registered domains
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

17

FY14.6 2Q Summary : B/S (Consolidated)
JPY in Million

FY13.6

FY14.6 2Q

Difference

Reason for change / Remarks

Current assets

33,83751,589+17,752

Cash and deposits

15,32922,836+7,507

Financing - IPO of econtext ASIA

Receivables

9,037

11,416+2,379Payment segment related items

Money held in trust

3,768

3,152

-616

Payment segment related items

Operational investment securities

2,641

10,711+8,070Mark-to-market for listed stocks

Fixed assets

22,17322,559+386

Investment securities

5,521

7,644

+2,123

Investment real estate

3,102

3,304

+202

Goodwill

9,968

7,785

-2,183

Total assets

56,01074,148+18,138

Current liabilities

21,801

30,488+8,687

Deposits

18,22921,882+3,653

Payment segment related items

Short-term borrowing

305

2,297

+1,992

Increased demand for working capital

Deferred tax liability

13

2,778

+2,765

Fixed liabilities

6,950

6,946

-4

Increased due toMark-to-market

Long-term borrowing

6,799

6,729

-70

Total liabilities

28,75237,434+8,682

Net assets

27,25836,714+9,456

Retained earnings

7,003

8,195

+1,192

31

4,820+4,789Minority interests

1,468

5,129

+3,661

Liabilities / Net assets

56,01074,148+18,138

Unrealized gains on securities

Increased investment profit onequity method. Capital alliance, etc
Decreased stake in econtext ASIA
upon the listing

Unrealized gains after tax
Increased upon the listing of
econtext ASIA

Unrealized
gains

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

18Segment Performance Review

Copyright © 2014 Digital Garage, Inc. All Rights Reserved19

DG’s Mid-Term Concept/Slogan

Copyright © 2014 Digital Garage, Inc. All Rights Reserved20Mid-Term Global Strategy

Three HQs
Hong Kong

Tokyo

Payment Segment HQ

DG Group HQ

San Francisco
Incubation Center
Agile Development HQ

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

21Incubation Stream
Functions of the 3 Headquarters / Connecting Silicon Valley, Japan,and Asia

San
Francisco / New York / Boston

Innovation
Tokyo

Optimization
Hong Kong

Monetization●Develop new media andtransfer expertise●Pursue user growth●Execute monetization2013 – 2015
Investment in Asia centered aroundsettlement platform●Broad network within the techindustry●Acquisition of and investment todevelopment, marketing andsettlement solutions●Develop/acquire new media●Develop monetization platform

2011 - Present

2012 – 2013

Completing the next generation agile
development network●From Japan to
Abroad●From US to Japan

Operating one of the most prominent
incubation space in the U.S.
Bilateral
Investment

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

22

DG Group’s Business Segment
Accelerating Lean Global Through 3 Business Segments

Ⅰ

Incubation Segment

Global Incubation of next-generation Internet businesses

INCUBATION

Investments to cultivate promising startups
Development of media
Technological & business development based on agile
development methodology

ⅡMarketing Segment

Provider of web ads and latest marketing technologies

MARKETING

Data science businessWeb advertisement, media business
O2O related, business development

Ⅲ

Payment Segment

One of the Asia’s largest payment platforms

PAYMENTOne of the largest online payment
service providers in Japan
Expansion of online payment platform
to Asia
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

23Incubation Segment
Ⅰ

Incubation Segment
Net Sales

Operating Income

FY13.62Q(7-12)Actual

748 M JPY

▲ 202 M JPY

FY14.62Q(7-12)Actual

2,394 M JPY

471 M JPY

FY14.6

Full Year Forecast

5,000 M JPY

1,100 M JPY➤ DG Incubation, Inc.

Invests in and incubates cutting-edge Internet startups➤ Open Network Lab, Inc.

Provides support to Internet-business entrepreneurs with global visions➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ Neo Innovation, Inc.

Provides agile software development solutions and lean start up methodology➤ New Context Services, Inc.

Provides unique disruptive solutions around data integrity
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

24Incubation Segment – Business Concept
Incubation Ecosystem within the DG Group
Maximizing investment return through the global incubation platform where DG invests in andprovides development and business support to portfolio companies at each growth stage
Provision of topnotch
mentors and global
development environment

Incubation experiencefor over 20 years

Hands-on, leveraging
Future Lab
Enabling Platform（Advertising・Payment）

Fusion of agile
development and leanstartup methodology
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

25Incubation Segment – Business Strategy
Seamlessly integrating the Import model with the Export model
Utilizing global agile development network and SF Incubation Center
Establishment of omnidirectional incubation model
Import Model

Export Model・Incubating promising startups globally・Supporting localization of foreign ventures

・Investing in promising domestic startups
・Supporting global expansion of Japanese
Lean Global companies

IPO

Media Lab Fund
Investing in ventures of eachstage globally

M&A

Early
Seed

Collaboration
with DG717

Middle –Later

Incubating promising seedstage Japanese ventures
http://onlab.jp/

Utilizing agile
development
network

Accelerate Global Incubation
Copyright © 2014 Digital Garage, Inc. All Rights Reserved26

DG Incubation - Highlights
Accelerating foreign investments upon DG717 launch in addition to domestic investments

Developing unique solutions in collaboration with Advertising, Payment,
and Future Lab ( DG’s tech team )Current Portfolio
Category

Investment Highlights
Book Value

Number( JPY in Million )MEDIA DO Co., Ltd. [Domestic/B2B]

64

10,606

Domestic company

19

5,727

Successfully went public on TSE Mothers(3678) in December 2013. Its core e-Bookbusiness grew steadily along with the market.
Announced stock-split in January 2014

Overseas company

45

4,878

Fund

5

512

CrowdWorks Inc. [Domestic/B2B]

Total

69

11,118EquityNote : Mark-to-market as of quarter end for listed stocks■Distribution by sector ( equity )Big Data
3.1%

Others19%

Ad
technology

Big Data
0.2%

Others 1.9%
Ad
technology
1.3%

17%

B2B
17％

Media
28％

B2B
50％

Media
42%

Commerce

16％

Company number basis

Value basis

Commerce
4%

Operates a crowd-sourcing service to freeengineers and creators from time-andlocation-dependent jobs. Registered jobs areworth over 10 billion yen and selected as oneof the 100 Next Generation Ventures That
Save Japan by Nikkei Business

iRidge, Inc. [Domestic/Ad Tech]An O2O marketing provider including popinfo,
a location-based push notification distribution
platform for smartphones. Winner of O2O
Grand Prix by EC Research Institute.

Udemy, Inc. [Foreign/Media]

A streaming site that empowers anyone toteach and learn on-line

Promoting global incubation by optimizing DG Group’s Enabling Platform
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

27

Open Network Lab - Highlights
Establishing brand recognition as Japan’s premier seed accelerator program
・Have nurtured 45 teams / 170 entrepreneurs and engineers in 3 years since theprogram launch・Launched global expansion program to SF and Asia and hosted events
Seed accelerator program update■ Increased international applicants

Supporting Entrepreneurs■ Hosted Open Network Lab Global Pitch at DG717

10 Countries 45 teams■ Global expansion in anticipation of funding frommajor global VCs
AnyPerk, Inc.
Employee perks and discounts
provider. Accepted to Y Combinator■ Organized UX/UI Conference Tokyo withNTT DOCOMOAppSocially Inc.
Customer acquisition tool for mobile
apps. Accepted to 500 Startups
WHILL, Inc.
Next generation personal mobility
provider. Accepted to 500 Startups
Launched the sales of WHILL Type-A

Copyright © 2014 Digital Garage, Inc. All Rights Reserved28

Neo Innovation, Inc. - Highlights
Developed agile development business by connecting leading software and design companies worldwide

Customer awareness and adoption for agile software development grew steadily
among major companies and across many industries
Ian McFarland
Chairman

Formerly of Pivotal Labs, Friendster

Giff Constable
CEO

Formerly of Proof, Jefferies, Trilogy

Kaoru Hayashi
Board MemberGroup CEO, Digital Garage

Joi ItoBoard Member

Director, MIT Media Lab

Global Coverage
Vision Statement:
Neo seeks to inspire the world to make software in a fundamentally
better way; a way that leads to more value for society, organizations,and the creators themselves.
North America

EuropeSan Francisco
New York
Columbus
Cincinnati

Edinburgh

AsiaSouth America

SingaporeMontevideo/Uruguay

Joi Okada
Board Member

Board Director, Global Business
Operations, Digital Garage

Ken Barker
COO

Founder, Edgecase

Major ClientsMedia /
Telecom

Financial
Services

Manufacturing

EC /SoftwarePublicServices

Evan Henshaw-PlathCTO

Ex-CTO of Odeo, Twitter’s
former company

Rika Nakazawa
Global VP of Biz Development

Ex-Amex ( Business development )Copyright © 2014 Digital Garage, Inc. All Rights Reserved

29New Context Services, Inc. - Highlights
Established a new entity focused on the growth of data security and integrity (KSI)
Collaborating with Neo in anticipation of product innovation in the rapid growth of the cloud

Strategic
vvPartners

vv

Information
Assurance

Provider of KSI, which helps
detect and mitigate unauthorizedattacks, system compromises andany unauthorized changes to the
network digital

Alerts internal and external
hacking, prevents data loss,
identifies forgeries, andfunctions as the core oftrusted data infrastructure

Leader softwaredeveloper in system
automation andcontinuous deployment
Provides reliable
traffic and message
management solutions

Daniel RiedelCEO
20 yearsTechnology/
Entrepreneur

Global Product
Design andInnovation

Steve MaysGM
20 years High
Scale Computing
Experience

Reduces costs & error
rates, improves time
to market and begins
to secure sensitive
areas

Allows scalability andremoves single points offailure and serves every
customer

Systems
Automation

Cloud
Orchestration

3 Core Solutions of New Context Services

Jason Hoffman

VP, Strategy andPortfolio; Head of
Digital Strategy,
Ericsson

Kaoru Hayashi
Group CEO, Digital Garage

Joi ItoDirector, MIT Media Lab

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

30Marketing Segment
Ⅱ

Marketing Segment
Net Sales

Operating Income

FY13.62Q(7-12)Actual

5,113 M JPY

249 M JPY

FY14.62Q(7-12)Actual

6,625 M JPY

335 M JPY

FY14.6

Full Year Forecast

12,000 M JPY

650 M JPY

➤ DG&Ibex company

Supports client’s business through Online to Offline strategy andweb marketing➤ BI. Garage, Inc.

Develops and provides ad products incorporating data science,social marketing, and cutting edge ad technology➤ NaviPlus Co., Ltd.

Offers website support tools including personalized recommendationengines

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

31Marketing Segment – Business Strategy
Collaborating with Dentsu group to begin strategic data science business

Deeply cultivating exiting digital marketing businessand realizing growth strategy illustrated by I, II, and III below

Ⅰ

Deeply cultivating digitalmarketing business

Monetization of O2O strategy and B2C media
businesses in addition to promoting growthof web promotions and mall businesses

Ⅱ

Expanding growth ofdata science business

Gathering data and know-hows of DG
Group and Dentsu group to pioneer a newfrontier in data business

Ⅲ

Expanding each businessto Asia

Horizontal expansion of businesses to themajor Asian markets in conjunction with
Payment Segment

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

32

DG&Ibex - Highlights
Cumulative Results in FY14.6 2Q (July to December)
Total sales

Number of clients

Sales per client

6.27 billion JPY

274 companies

22.89 million JPY+38% YoY+16% YoY+19% YoY

Maintaining positive momentum from the previous half ; record sales in first half

【Growth Factors】

Sales Growth

Growth led by ROI-focused marketing solutions taking
advantage of deep know-hows in digital marketing● Affiliated marketing targeting financial and cosmetic industries continued
to lead sales◆Media● Distribution value (for six months) increased 30% YoY to 26.3 billion yen
at Point Mall

● Collaborating and partnering with a membership platform with millionsof members◆O2O● Sending customers to actual storefronts based on the know-hows gained
from the mall business● Utilizing user data from major retail distributors to optimize customer
communication and realize omni-channel retailing

62.7

Sales (100 million JPY)

◆Solution

80

54.8

60
44.4
40

45.6

+38%

35.4

YoY

20

0
上期
1H

下期
2H

2012.6

1H
上期

下期
2H

2013.6

1H
上期
2014.6

Copyright © 2014 Digital Garage, Inc. All Rights Reserved33BI. Garage - Highlights
A new business in the business intelligence field leveraging big data

DG Group, Dentsu, and Kakaku.com jointly begandata science business to optimize marketing activities＜Business Overview＞
Data from
Kakaku.com

Data from
DGG

Data from Dentsu Groupand others

Data fromsponsors
Clients datafrom sponsors
Behavior data
etc

Data
scienceview

Latesttechnology

Coordination
with CRM area
A two-phase approach to develop the business

DSP targeting ad

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

34

NaviPlus - Highlights
Further expanding customer baseas a leading
recommendation
service provider
in JapanTools
Increased
Adoptionof NaviPlus’ Comprehensive
Marketing- Installed in 600+ websites, Over 1.5 billion requests per month -NaviPlus’ Comprehensive Marketing Tools

Launch of Next Generation
O2O Solutions

Providing tools such as recommendation engines andcustom website search to increase visitor conversion
rates and to increase sales of EC stores

Omni-channel-compatible solution“Recommend Push” with NTT DATA and iRidge

Site Visits

Search/CompareProviding recommendation based on
online and offline purchasing / behavior data
Purchase

Leading to purchase without dropping out

Customers who viewed this item also viewed
Recommended products for you
Customer reviews by those who purchased
this item

NTT DATA
Omni-channel
solution[Offline Store data]

NaviPlus

Recommend■Recommen
dations tocustomers[EC website data]

Location-based
push notifications
to smartphones
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

35

Payment Segment
Ⅲ

Payment Segment
Net Sales

Operating Income

FY13.62Q(7-12)Actual

7,984 M JPY

789 M JPY

FY14.62Q(7-12)Actual

6,603 M JPY

463 M JPY

FY14.6

Full Year Forecast

15,000 M JPY

1,150 M JPY➤ econtext ASIA Ltd.

Payment headquarters to expand e-commerce platforms globally➤ econtext, Inc.

Integrates online and offline business as the convenience store payment pioneer➤ Veritrans Inc.

Provides leading e-commerce payment solutions➢ Veritrans Shanghai（50％ owned by econtext ASIA ／ equity method affiliated company）
Chinese JV➢ PT MIDTRANS（Veritrans Indonesia) ( 23% owned by econtext ASIA／Non-consolidated）
Indonesian JV➢ Citrus Payment Solutions Pte. Ltd（ 15.59%／Investment ）The holding company for the Indian online payment solutions provider( Citrus Payment Solutions Pvt. Ltd )Copyright © 2014 Digital Garage, Inc. All Rights Reserved

36

Payment Segment – Business Strategy
Further expanding payment business, upon econtext ASIA’s IPO

OfflineOnlineAchieving multi-directional strategy by expanding the settlement
expertise nurtured in Japan horizontally to Asia and to offline



Japan

Asia

STRATEGY Ⅰ

STRATEGY Ⅱ

Continued expansion ofdomestic business

Aggressive expansion to Asia

Jointly cultivating settlement business with strong
domestic partners such as shareholders, expanding
major client base, and developing new businesses



Exploring small and medium-sized EC service segment

Strengthening
industries

alliances

STRATEGY Ⅲ

withinsettlement/EC

Emerging EC Markets

→ JV



Developed EC Markets

→ M&A



China&India→ Tailored strategy

Expansion as a Japan Consortium

Simultaneous expansion of offline settlements toJapan and Asia

Credit Card Adoption<20% = big opportunity

LatestTechnology
New lifestylesupported bysmartphonesettlements

EC / Credit Card about to boom
Rapid smartphone adoption
being the key

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

37

Payment Business - Highlights
FY14.6 1H (July to December ) Results
Services expanded to

Number of transactions

Total amount of transactions

4 countries

83.57 million

396.2 billion JPY

Japan, Indonesia, China, India+13.3% YoY+14.9% YoY

Accelerating business expansion upon econtext ASIA’s IPO◆ Domestic – Accelerating partnerships
with major players (mPOS’s full-scale launch)【Major Partners - Veritrans】
 NTT WEST

Introduced mPOS (a smartphone-based
settlement solution) to Flet’s Smartpay◆ Foreign – Widening Asian expansion upon IPO at HKEx
 Joint investment to major Indian settlement solution
provider Citrus with Sequoia Capital, etc
 Capital and business alliance between econtext ASIA
and TISTransaction【Transaction amount】
amount ( 100 M ) NTT EAST / WEST

Added Flet’s Matomete Payment to its
payment options

 Sagawa Financial
Implemented voice-supported credit
card registration system to EC
customer service lines

2,500

Veritrans
econtext

2,000
1,500
1,000

1,403 1,444

983 1,015

1,541 1,557

1,059 1,063

1,647

1,107

1,801

1,226

1,899

2,008 1,949 2,013

1,291 1,401 1,317

1,380

500

【New Services - econtext】
 Convenience Store O2O

Receiving refunds and cash-backs at convenience stores,
enabling deposits to DOCOMO accounts, and direct sales ofJetstar air tickets at Lawson

421

428

482

494

539

1Q

2Q

3Q

4Q

1Q

575

609

607

632

633

2Q

3Q

4Q

1Q

2Q

+12.5%
YoY+10.1%YoY

0

FY12.62012.6期

FY13.62013.6期

FY14.62014.6期

Note: # of transactions is on a gross basis. Transaction amount includes
payment amount and data transaction amount. Verirtrans's FY12 figures
included for comparison
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

38

Appendix

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

39Basic agreement on Capital and Business Alliance with Betaworks

About Betaworks

New York-based Startup Incubation Studio with a Focus on Social
Media-related Businesses
Advanced Incubation Structure
Early-stage investments in promising
startups and incubating businesses by
providing development support with own
engineers and designers

Diverse Portfolio
Holds shares in many promising
startups with strong connections within
the startup industry

Broad Industry Connections
John Borthwick has wealth of industry
experience including searing as the SVP
of Technology and Corporate Alliances
at Time Warner prior to founding
Betaworks. He is one of the mostrespected figures in the New York’s
John Borthwick
startup scene

Exit Track Records
Provided development support to Summize,
helping to develop the leading search engine for
Twitter, and Tweetdeck, a power-user Twitterclient for desktop, web, and mobile devices. Boththese companies were subsequently sold to Twitter

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

40Basic agreement on Capital and Business Alliance with Betaworks
Strengthening collaboration with a prominent studio in the emerging Silicon Alley ( NYC )Examples of Business Collaboration with DG Group
Deal source for investment

Open Network Lab

Promoting rapid-growth of startups

Collaboration with Neo●Introducing promising startups to eachother

●Providing mentorship to participating
teams●Accelerating incubation businesses in
Asia including Japan●Jointly working in New York and San
Francisco offices
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

41

Ref.) Excerpts from IT related media
Media Accolades of Betaworks

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

42Quarterly Profit and Loss (Consolidated)

JPY in Million

FY12.6

FY13.6

FY14.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

Net sales

3,418

2,879

5,202

3,403

5,307

8,539

6,482

7,636

7,273

8,349

Incubation

583

17

1,973

37

131

616

497

1,263

927

1,467

Marketing

1,906

1,939

2,295

2,416

2,364

2,748

2,825

3,104

3,068

3,557

Payment

928

922

933

949

2,810

5,174

3,158

3,269

3,277

3,326

Operatingincome

437

△ 134

1,708

△ 389

△ 51

523

151

698

86

726

Incubation

387

△ 136

1,650

△ 268

△ 258

56

△ 20

512

△ 77

548

Marketing

142

139

163

65

129

120

55

167

136

199

Payment

154

128

142

126

308

480

253

260

203

260

Ordinary
income

594

70

2,193

△ 149

167

1,000

719

1,191

473

1,214

Net income

533

77

1,747

△ 251

213

700

1,294

507

389

1,037

EBITDA

698

163

2,292

△ 186

696

1,573

2,050

1,581

970

1,956

44

44

44

56

200

333

211

195

191

204

Amortization

Note: Operating income per segment is based on figures prior to elimination or Group deduction. EBITDA is based on preliminary calculation.
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

43Press Releases
Date

Title

2014.02.13

Digital Garage to invest in and partner with US-based Internet studio Betaworks

2014.01.07

Digital Garage expands its incubation business in Asia by investing in Indonesia's major online babyproduct retailer Bilna

2013.12.25

Digital Garage's econtext ASIA forms capital business alliance with TIS to jointly promote solutions to eCommerce businesses in AsiaBLANK

2013.12.25

Digital Garage's econtext ASIA invested in the major Indian online payment solutions provider Citrus

2013.12.19

Digital Garage's econtext ASIA becomes listed at the Hong Kong Stock Exchange

2013.12.05

Digital Garage's subsidiary econtext ASIA to be listed on the Hong Kong Stock Exchange

2013.11.06「Kakaku.com」and VeriTrans forms alliance to provide overseas delivery service

2013.11.01

Digital Garage Opens a Startup Incubation Center in San Francisco to Accelerate Investment Business on
a Global Scale2013.11.01

Digital Garage and Neo Innovation Launching New Context Services

2013.11.01

Data Science Business to Be Launched by JV

2013.09.20

New Context Services, A Neo Innovation Company, Announces Alliance with Guardtime to Help Deliver
Authenticated Data

2013.08.12

econtext ASIA's subsidiary, VeriTrans, launched a smartphone-based payment service, VeriTrans mPOS

2013.08.01

Digital Garage and Dentsu to establish a joint venture, Dentsu ScienceJam, to commercialize results oflatest scientific research

2013.07.29

Notice of Consolidated Subsidiary Company's Listing Application to Hong Kong Exchanges and Clearing
Limited2013.07.23

CGM Marketing to accelerate its acquisition of advertiser and publisher clients for the Kiip smartphone
advertising and reward platform

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

44

Press Releases
Date

Title

2013.07.09

CGM Marketing to accelerate the expansion of Kiip, a smartphone advertisement and rewards technology,
to convenience stores, bringing O2O solutions to national chains2013.07.02

Digital Garage Forms Business Alliance with Credit Saison

Copyright © 2014 Digital Garage, Inc. All Rights Reserved45

Please note that the business forecasts and strategies covered in today’s presentation are based on our current evaluation and future results may vary significantly depending on unforeseeable
events or circumstances. This announcement is solely for the purpose of the investors relationship and is not for making any solicitation for investment in any securities. This announcement does
not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior toregistration or qualification under the securities laws of any such jurisdiction. Any securities of our consolidated subsidiaries have not been registered under the U.S. Securities Act of 1933, as
amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities
Act. Any public offering of securities to be made in the United States will be made by means of a prospectus. Such prospectus will contain detailed information about the company making theoffer and its management and financial statements..